How Does A Gold IRA Work?

A Gold IRA is an individual retirement account that holds both assets and precious metals.

A Gold IRA works similarly to a regular IRA and is quite simple to set up. Lots of the work is done by the Gold IRA company; all you need to do is open the account and fund it from your current retirement plan. Once you have money in your account, Gold IRA administrators are responsible for purchasing precious metals on your behalf.

However, let’s break down the process of how a Gold IRA works a little further.

Step-by-Step Guide To Setting Up A Gold IRA

Step 1. The first thing you must do is find a Gold IRA account endorsed by an authorized IRA trustee or administrator. Once you have found a Gold IRA company, applying for the account is typically a quick process – you can fill an account opening form online or offline.

(Click here to see our Top Rated Gold IRA Companies)

Step 2. Once the account is open, you must inform your current retirement plan administrator of the Gold IRA. You will need to let them know how you plan on funding the account, whether that is with money or assets in your current retirement fund.

Step 3. Your Gold IRA administrator will then contact your current retirement fund administrator on your behalf, and they will discuss your plan on funding your account. Your current administrator will transfer the required amount of cash or assets to the Gold IRA. This transfer is known as an IRA rollover.

Step 4. The above process takes about two weeks before the funds are available in your Gold IRA. Once the Gold IRA is funded, you can now instruct your IRA administrator on the number of precious metals to buy for your account.

Step 5. Following this discussion, your Gold IRA administrator will contact an authorized precious metal dealer and purchase the gold or other precious metals.

Step 6. The precious metals bought are credited to your account. Neither you nor your administrator will get to see the precious metals. Instead, your administrator informs the dealer to deliver the physical precious metals or gold to a partner depository.

Step 7. You can only receive your precious metals upon retirement or when you are 59.5 years. Before this, it was considered an unauthorized retirement distribution. You will thus be liable for taxation and a 10% penalty.

Step 8. Retirement funds from your paycheck will be paid to your Gold IRA monthly, and you can instruct the administrators to buy additional gold and other precious metals every month. By investing in gold, the value of your money is retained over the long term.

Types Of Gold IRA Accounts

Traditional Gold IRA

A traditional Gold IRA is a pre-tax retirement savings account. All your contributions and gains will not be taxed. In this IRA, you can contribute up to $5,500 if you are under 50. For those over 50, the IRS limits your contribution to $6,500.

Once you have retired and start enjoying distributions from this Gold IRA, you will have to pay tax on your contributions.

Roth Gold IRA

A Roth Gold IRA is an after-tax Gold IRA, and it is very similar to a Roth IRA. Since your contributions to this Gold IRA are already taxed, you will not have to pay any tax on your distributions. If you leave this Gold IRA to your beneficiaries, they will enjoy the tax-free contributions for the life of the Gold IRA.


Like with a SEP IRA, the SEP Gold IRA is available to self-employed persons, business owners, and their employees. Contributions to this account are not taxed, and hence the distributions upon retirement will be taxed.

A SEP Gold IRA allows you to contribute significantly more than a Traditional Gold IRA. The IRS allows you to contribute up to 25% of your income or $53,000 per year, whichever is less.

Depending on your situation, you can choose from these three Gold IRA accounts. There are different benefits and drawbacks to them all, and the best way to ensure you’re funding the right Gold IRA for you is to get advice from an IRA administrator about your retirement needs.

Different Methods Of Funding Your Gold IRA

IRA Transfer

An IRA transfer is tax-deferred and penalty-free to transfer funds from your traditional IRA to a Gold IRA. All you need to do is fill a transfer request form. Present this form to your current IRA administrator, and they will transfer the amounts to your new Gold IRA.

An IRA transfer may involve you receiving the funds from your IRA administrator. When you do, you have up to 60 days to complete the transfer. If you don’t transfer on time, you are liable for taxes and penalties.

Gold IRA Rollover vs Transfer

IRA Rollover

A Gold IRA rollover is done between the two administrators without your involvement. The administrators will get in touch with each other and complete the rollover of funds to the new gold IRA. It can take up to two weeks.

You will get notified once the funds are credited to your Gold IRA. You can then instruct your administrator on the gold and precious metals to buy for you.

You can roll over funds from different IRAs to a Gold IRA without any restrictions. However, you can only rollover funds from a 401(k), 403b, 457b, and TSP if you are over 59.5 years of age or the accounts are from a previous employer.

Cash Contributions

Your Gold IRA administrator will also accept cash contributions to the account. Taxation will depend on the type of Gold IRA you choose to operate, in this instance.

Allowable Precious Metals In Your IRA

When investing in precious metals and gold, you need to know and invest only in those approved by the IRA. The precious metals you invest in with your Gold IRA must also meet IRS set purity standards and currency attributes. Your administrator and precious metals dealer will ensure that the IRA approves the metals you are investing in.


The best thing you can do if you’re thinking of setting up a Gold IRA is to spend some time talking to a Gold IRA expert about the process of creating an account and funding it. The first thing to consider is the type of Gold IRA you would like to fund, which might depend on your age and your current financial situation.

However, there is nothing to worry about, as your administrator is there for each step of the process, and they, along with the precious metals dealer, have an abundance of expertise and will ensure you’re making the right moves to set up your Gold IRA.

But, how to choose a Gold IRA? Where should I start? We have reviewed the Best Gold IRA Companies to help make this decision a little easier.


We discuss the best allocation strategies for precious metals and how to save thousands of dollars in fees in our must read Gold IRA guide.

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